China's ICBC becomes Dubai commodities exchange settlement bank

Industrial and Commercial Bank of China (ICBC), the world's largest bank by assets, has become a settlement bank for the Dubai Gold & Commodities Exchange (DGCX), the exchange said on Tuesday, allowing more investors to clear transactions in yuan.

ICBC becomes the second Chinese bank to join DGCX's wholly-owned subsidiary, Dubai Commodities Clearing Corporation, as a clearing and settlement bank. Bank of China became a member in March.

The four other settlement banks are Dubai-based Emirates NBD, Standard Chartered, HSBC and India's Bank of Baroda.

"The association will facilitate adequate yuan liquidity for trading and investment between the local and Chinese economies. This will also lead the way for future product developments," said Zhou Xiaodong, general manager of ICBC's Abu Dhabi branch.

Via ICBC members of Dubai Commodities Clearing Corporation will be able to open settlement bank accounts and process settlement obligations for yuan-denominated trades as well as use other services, DGCX said.

Links between the exchange and China have grown recently, with DGCX signing a deal last month to become the first foreign market platform to use the Shanghai Gold Exchange's new yuan-based gold fix to develop derivative products.

Prospects for the future use of the yuan in trade between the UAE and China received a boost in September after the operator of China's foreign exchange trading platform said it had agreed to establish direct trading for the two pairs, starting on Sept. 26.

Previously, trade occurred indirectly through third currencies such as the U.S. dollar.

Sources told Reuters in August that Agricultural Bank of China would be allowed to clear yuan transactions in Dubai for the United Arab Emirates, making it the first Chinese lender in the UAE to do so.